SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10K/A
Amendment No. 1
Annual Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the transition period March 1, 1994 to October 31, 1994.
Commission File Number 1-8551
Hovnanian Enterprises, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-1851059
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Highway 35, P. O. Box 500, Red Bank, New Jersey 07701
(Address of principal executive offices)
908-747-7800
(Registrant's telephone number, including area code)
The undersigned registrant hereby amends the following items and other
portions of its Annual Report for the transition period from March 1, 1994 to
October 31, 1994 on Form 10K:
Part III, Item 10 - Directors and Executive Officers of the Registrant
(pg. 37)
Part III, Item 11 - Executive Compensation (pg. 38)
Part III, Item 12 - Security Ownership of Certain Beneficial Owners and
Management (pg. 38)
Part III, Item 13 - Certain Relationships and Related Transactions
(pg. 38).
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
HOVNANIAN ENTERPRISES, INC.
(Registrant)
DATE: February 27, 1995 By: /s/Paul W. Buchanan
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's By-laws provide that the Board of Directors shall consist
of nine Directors who shall be elected annually by the shareholders. The
Company's Certificate of Incorporation requires that, at any time when any
shares of Class B Common Stock are outstanding, one-third of the Directors
shall be independent. The Directors of the Company will hold office until
the next Annual Meeting of Shareholders on May 2, 1995. Each executive
officer holds office for a one year term.
Year Became
Name Age Position a Director
Kevork S. Hovnanian 71 Chairman of the Board, Chief l967
Executive Officer, and Director
of the Company.
Ara K. Hovnanian 37 President and Director of l981
the Company.
Paul W. Buchanan 44 Senior Vice President-Corporate l982
Controller and Director of the
Company.
Arthur M. Greenbaum 69 Director of the Company. 1992
Timothy P. Mason 54 Senior Vice President-Adminis- 1980
tration/Secretary and Director
of the Company.
Desmond P. McDonald 67 Director of the Company. 1982
Peter S. Reinhart 44 Senior Vice President and General 1981
Counsel and Director of the
Company.
John J. Schimpf 45 Executive Vice President and 1986
Director of the Company.
J. Larry Sorsby 39 Senior Vice President-Finance/ N/A
Treasurer
Stephen D. Weinroth 56 Director of the Company. 1982
Mr. K. Hovnanian founded the predecessor of the Company in l959 and has
served as Chairman of the Board and Chief Executive Officer of the Company
since its incorporation in l967. Mr. K. Hovnanian was also President of the
Company from 1967 to April 1988. Mr. Hovnanian is also a director of
Midlantic Corporation.
Mr. A. Hovnanian was appointed President in April 1988, after serving as
Executive Vice President from March 1983. Mr. A. Hovnanian is the son of Mr.
K. Hovnanian.
Mr. Buchanan was appointed Senior Vice President-Corporate Controller in
May l990, after serving as Vice President-Corporate Controller from March
l983.
Mr. Greenbaum has been a senior partner of Greenbaum, Rowe, Smith, Ravin
& Davis, a law firm since 1953. Mr. Greenbaum qualifies as an independent
Director as defined in the Company's Certificate of Incorporation.
Mr. Mason was appointed Senior Vice President of Administration/
Secretary of the Company in March 1991, after serving as Vice President -
Administration and Secretary/Treasurer of the Company from March l982.
Mr. McDonald has been a Director of Midlantic Bank N.A. since 1976,
Executive Committee Chairman of Midlantic Bank N.A. since August 1992 and was
President of Midlantic Bank N.A. from 1976 to June 1992. He is also a
Director of Midlantic Corporation and was Vice Chairman of Midlantic
Corporation from June 1990 to July 1992. Mr. McDonald qualifies as an
independent Director as defined in the Company's Certificate of
Incorporation.
Mr. Reinhart has been Senior Vice President and General Counsel since
April 1985.
Mr. Schimpf has been Executive Vice President of the Company since April
1988.
Mr. Sorsby was appointed Senior Vice President-Finance/Treasurer of the
Company in March 1991, after serving as Vice President/Finance of the Company
since September 1988.
Mr. Weinroth is Co-chairman of the Board and Chief Executive Officer of
VETTA Sports, Inc., a worldwide supplier of bicycle parts and accessories and
Vice Chairman of SCS Communications, Inc., a media company with publishing
and magazine interests. He has held such positions since November 1993 and
August 1993, respectively. He is also an independent investor and financial
advisor. From July 1989 to April 1992 he was Chairman of the Board and Chief
Executive Officer of Integrated Resources, Inc. He was a Managing Director
and a member of the Board of Directors of Drexel Burnham Lambert Incorporated
from 1981 until 1989. Mr. Weinroth was also Chairman and Chief Executive
Officer of Drexel Burnham Lambert Commercial Paper Incorporated during that
time. He is a director of Core Holdings B.V.; First Britannia Mezzanine
N.V.; SCS Communications, Inc., and VETTA Sports, Inc. In February 1990 and
May 1990, Integrated Resources, Inc. and Drexel Burnham Lambert Incorporated,
respectively, filed for protection under Chapter 11 of the Federal Bankruptcy
Code. Mr. Weinroth qualifies as an independent Director as defined in the
Company's Certificate of Incorporation.
Item 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following table summarizes the compensation paid or accrued by the
Company for the chief executive officer and the other four most highly
compensated executives during the transition period March 1, 1994 to October 31,
1994 and the year ended February 28(29), 1994, 1993, and 1992.
Long- Term Compensation
-------------------------------
Awards
Annual Compensation -------------------------------
------------------------------- Number of
Other Securities All
Year Annual Restricted Underlying Other
or Compen- Stock Options LTIP Compen-
Name and Principal Position Period Salary Bonus(1) sation(2) Awards SARs(3) Payouts sation(4)
- --------------------------- ------ -------- --------- --------- ---------- -------- ------- ---------
Kevork S. Hovnanian 8 mos.10/94 $536,219 $133,334 $0 $0 0 N/A $ 7,811
Chairman of the Board of 1994 $720,352 $300,000 $0 $0 0 N/A $11,038
Directors, Chief Executive 1993 $681,178 $150,000 $0 $0 0 N/A $ 9,744
Officer, and Director of 1992 $643,946 $ 50,000 $0 $0 0 N/A $ 9,661
the Company
Ara K. Hovnanian 8 mos.10/94 $520,735 $133,334 $0 $0 0 N/A $ 6,932
President and Director 1994 $632,600 $300,000 $0 $0 0 N/A $16,143
of the Company 1993 $619,381 $200,000 $0 $0 295,000 N/A $ 947
1992 $524,954 $150,000 $0 $0 0 N/A $ 1,730
John J. Schimpf 8 mos.10/94 $144,086 $ 48,251 $0 $0 0 N/A $18,443
Executive Vice President 1994 $200,277 $100,000 $0 $0 0 N/A $15,304
and Director of the 1993 $186,599 $ 80,000 $0 $0 70,000 N/A $11,463
Company 1992 $175,078 $ 35,000 $0 $0 0 N/A $18,479
J. Larry Sorsby 8 mos.10/94 $121,403 $ 40,833 $0 $0 0 N/A $11,085
Senior Vice President/ 1994 $169,371 $ 82,500 $0 $0 0 N/A $ 7,953
Finance and Treasurer of 1993 $157,223 $ 60,000 $0 $0 35,000 N/A $ 5,264
the Company 1992 $144,675 $ 30,000 $0 $0 0 N/A $ 7,207
Peter S. Reinhart 8 mos.10/94 $102,879 $ 29,394 $0 $0 0 N/A $13,748
Senior Vice President/ 1994 $152,022 $ 56,800 $0 $0 0 N/A $12,141
General Counsel and 1993 $137,945 $ 50,000 $0 $0 15,000 N/A $10,445
Director of the Company 1992 $147,936 $ 20,000 $0 $0 0 N/A $16,161
- ------
Notes:
(1) Includes awards not paid until after year end.
(2) Includes perquisites and other personal benefits unless the aggregate
amount is lesser than either $50,000 or 10% of the total of annual salary
and bonus reported for the named executive officer.
(3) The Company does not have a stock appreciation right ("SAR") program.
(4) Includes accruals under the Company's savings and investment retirement
plan (the "Retirement Plan"), deferred compensation plan (the "Deferred
Plan") and term life insurance premiums for each of the named executive
officers for the transition period March 1, 1994 to October 31, 1994
as follows:
Retirement Deferred Term
Plan Plan Insurance Total
---------- --------- --------- ----------
K. Hovnanian........... $ 7,495 $ 0 $316 $ 7,811
A. Hovnanian........... $ 6,301 $ 0 $631 $ 6,932
Schimpf................ $ 9,486 $ 8,521 $436 $18,443
Sorsby................. $ 7,880 $ 2,839 $366 $11,085
Reinhart............... $ 9,734 $ 3,702 $312 $13,748
Director Compensation
Each director who is not an officer of the Company is paid $2,000 per
regularly scheduled meeting, $1,000 for each committee meeting attended,
$2,000 for special meetings attended, and a bonus. All directors are
reimbursed for expenses related to his attendance at Board of Directors and
committee meetings. During the transition period March 1, 1994 to October
31, 1994, including an accrued bonus paid on February 6, 1995, Mr. McDonald
received $18,500, Mr. Greenbaum received $15,500, and Mr. Weinroth received
$18,500.
Option Grants in Last Fiscal Year
There were no options granted during the transition period March 1,
1994 to October 31, 1994.
Aggregated Option Exercises During the Transition Period March 1, 1994 to
October 31, 1994 and Option Values at October 31, 1994
Securities Underlying
Number of Unexer- Value of Unexercised
cised Options at In-the-Money Options
Shares October 31, 1994(1) at October 31, 1994(1)
Acquired ------------------ ----------------------
On Value Exer- Unexer- Exer- Unexer-
Name Exercise Realized cisable cisable cisable cisable
- ---------------------- -------- --------- ------- ------- ------------ -------
Kevork S. Hovnanian... 0 $ 0 None None N/A N/A
Ara K. Hovnanian...... 0 $ 0 323,333 196,667 $81,563 $ 0
John J. Schimpf....... 0 $ 0 83,333 46,667 $52,500 $ 0
J. Larry Sorsby....... 0 $ 0 32,667 23,333 $18,375 $ 0
Peter S. Reinhart..... 0 $ 0 29,000 10,000 $21,000 $ 0
- ------
Notes:
(1) The closing price of the Class A Common Stock on the last trading day
of October 1994 on the American Stock Exchange was $6.00.
Ten Year Option Repricings
For the eight months ended 0ctober 31, 1994, there was no adjustment
or amendment to the exercise price of the stock options previously awarded.
Compensation Committee Interlocks and Insider Participation
Mr. Weinroth is Chairman of the Compensation Committee which also
includes Mr. McDonald. Both are non-employee directors and were never
officers or employees of the Company. Mr. K. Hovnanian who is Chairman of
the Board of Directors and Chief Executive Officer of the Company resigned
from the Compensation Committee on May 10, 1994. See "Certain Transactions"
for information concerning Messrs. McDonald's and Greenbaum's business
relationship with the Company.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of January 13, 1995 the Class A
Common Stock and Class B Common Stock of the Company beneficially owned by
each Director, by all Directors and officers of the Company as a group
(including the named individuals) and holders of more than 5%:
Class A Common Stock Class B Common Stock
------------------------ --------------------------
Amount and Amount and
Nature of Nature of
Directors, Nominees and Beneficial Percent Beneficial Percent
Holders of More Than 5% Ownership(1) of Class(2) Ownership(1) of Class(2)
- ----------------------------- ------------ ----------- ------------ -----------
Kevork S. Hovnanian(3)....... 5,617,637 36.9% 5,788,387(5) 68.1%
Ara K. Hovnanian(4).......... 1,343,088 8.8% 1,202,236 14.2%
Paul W. Buchanan............. 24,013 .2% 19,320 .2%
Arthur M. Greenbaum.......... 1,500 -- 1,500 --
Timothy P. Mason............. 20,904 .1% 14,257 .2%
Desmond P. McDonald.......... 3,750 -- 3,750 --
Peter S. Reinhart............ 18,855 .1% 15,335 .2%
John J. Schimpf.............. 85,419 .6% 45,492 .5%
Stephen D. Weinroth.......... 2,250 -- 2,250 --
All Directors and officers
as a group (10 persons).... 7,146,689 47.0% 7,110,587 83.6%
- ------
Notes:
(1) The figures in the table in respect to Class A Common Stock do not
include the shares of Class B Common Stock beneficially owned by the
specified persons, which shares of Class B Common Stock are convertible
at any time on a share for share basis to Class A Common Stock. The
figures in the table represent beneficial ownership (including ownership
of 392,547 Class A Common Stock Options and 288,120 Class B Common Stock
Options, currently exercisable or exercisable within 60 days) and sole
voting power and sole investment power except as noted in Notes (3), (4),
and (5) below.
(2) Based upon the number of shares outstanding plus options referred to
in Note 1.
(3) Includes 279,562 shares of Class A Common Stock and 264,562 shares
of Class B Common Stock as to which Kevork S. Hovnanian has shared
voting power and shared investment power. Kevork S. Hovnanian's address
is 10 Highway 35, P. O. Box 500, Red Bank, New Jersey 07701.
(4) Includes 8,350 shares of Class A Common Stock and 10,150 shares of
Class B Common Stock as to which Ara K. Hovnanian has shared voting power
and shared investment power. Ara K. Hovnanian's address is 10 Highway
35, P. O. Box 500, Red Bank, New Jersey 07701
(5) Includes 2,829,413 shares of Class B Common Stock held by the Kevork
S. Hovnanian Family Limited Partnership, a Connecticut limited
partnership (the "Limited Partnership"), beneficial ownership of which
is disclaimed by Kevork S. Hovnanian. Kevork S. Hovnanian's wife,
Sirwart Hovnanian, as trustee of the Sirwart Hovnanian 1994 Marital
Trust, is the Managing General Partner of the Limited
Partnership and as such has the sole power to vote and dispose of the
shares of Class B Common Stock held by the Limited Partnership.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Board of Directors has adopted a general policy
providing that it will not make loans to officers or directors of the Company
or their relatives at an interest rate less than the interest rate at the
date of the loan on six month U.S. Treasury Bills, that the aggregate of such
loans will not exceed $2,000,000 at any one time, and that such loans will be
made only with the approval of the members of the Company's Board of
Directors who have no interest in the transaction. At October 31, 1994
related party receivables from officers and directors amounted to $1,677,000.
Notwithstanding the policy stated above, the Board of Directors of the
Company concluded that the following transactions were in the best interests
of the Company.
On March 1, 1990, the Company sold all the assets and liabilities of
its wholly-owned engineering subsidiary Najarian and Associates ("N & A")
to the employees of N & A for $3,600,000. One of these employees
and former President of N & A was Tavit O. Najarian, the son-in-law of Mr.
K. Hovnanian, Chairman of the Board and Director of the Company. The sale
was approved by members of the Company's Board of Directors who were not
related to Mr.Najarian. At the closing the Company received a cash payment
of $720,000 and a $2,880,000 note. Originally the note carried an annual
interest rate of 10% and was to amortize over ten years. As long as any
portion of the note is outstanding, the Company receives 25% of the net cash
flow. During the year ended February 29, 1992, N & A began to
experience a significant decrease in business activity. As a result,
the note was modified by changing the interest rate to prime, add accrued
interest from September 1, 1991 to September 1, 1992 to principal and
reschedule principal payments over the balance of the term of the note. As
a result of continued financial difficulties, a committee consisting of
independent directors of the Board of Directors of the Company (the
"Committee") engaged an outside consultant to determine the fair market
value of the above note. Based on the consultant's findings, the
Committee recommended a reduction in the note including accrued interest
from $2,983,000 to $1,100,000 at February 28, 1994. This reduction of
the note was charged to operations during the year ended February 28,
1994. In addition, the Committee recommended a new term of ten years
with annual interest on the note of 5% for the first two years adjusting
to prime thereafter. Amortization would begin in year three with an
annual minimum amount of 5%, ranging up to 30% in year 10, or 85% of
cash flow after interest, whichever is greater. The Committee also
recommended a $300,000 discount if the loan was paid in full during the
first two years.
The Company provides property management services to various
limited partnerships including two partnerships in which Mr. A. Hovnanian,
President and a Director of the Company, is a general partner, and
members of his family and certain officers and directors of the
Company are limited partners. At October 31, 1994, these partnerships
owed the Company $238,000.
On May 10, 1994, the Board of Directors approved the acquisition of
the 10% minority interest in certain Florida subsidiaries owned by
Paul W. Asfahl, President of the Company's Florida Division. For his
10% interest, the Company issued 45,000 shares of Class A Common Stock to
Mr. Asfahl.
On August 2, 1994, the Board of Directors approved the acquisition
of the 15% minority interest in the New Fortis Corporation owned
primarily by Marvin D. Gentry, President of the New Fortis Corporation.
For the 15% interest, the Company issued 135,000 shares of Class A Common
Stock to Mr. Gentry and the other owners.
Mr. Desmond McDonald, a Director of the Company, was the President of
Midlantic National Bank ("Midlantic") until July 1992. Mr. McDonald
currently owns 10,794 shares of common stock of Midlantic. Form time to
time the Company obtains services and financing from Midlantic. The Company
has a Revolving Credit Agreement with a group of banks, including
Midlantic. At October 31, 1994 the Company and its subsidiaries owed
$32,129,000 to Midlantic pursuant to a Revolving Credit Agreement and
other financing arrangements.
Mr. Arthur Greenbaum is a senior partner of Greenbaum, Rowe,
Smith, Ravin & David, a law firm retained by the Company during the
eight months ended October 31, 1994.
